Ireland has most effective tax system in EU

Ireland has the most effective and efficient tax system for businesses, among EU member states, and the sixth best in the world, according to a survey by professional services giant, PwC.

In its latest ‘Paying Taxes’ report, into international tax systems, co-produced with the World Bank, PwC notes that Ireland’s effective corporate tax rate of 12.4%, compares to an EU average of 13.1% and a global average of 16.3%; and that the administrative burden for firms based here compares much more favourably than in other nations.

“Businesses are affected not only by tax rates, but also by the procedural burden of compliance,” the report notes.

Furthermore, according to the study, while a typical Irish company will spend nearly half of its total commercial profit in taxes and two weeks dealing with its tax affairs (making a payment nearly every six weeks); globally firms are paying over a third of their profit on taxes and spend over seven weeks dealing with their affairs, while making a tax payment every fortnight.

The PwC/World Bank report, which covers 189 global economies, also shows that Irish firms, on average, spend 80 hours complying with tax regime compared to 218 hours in Germany.

It also shows that Ireland’s statutory headline rate on profits is broadly similar to the effective rate.

“The survey demonstrates that having simpler tax systems with competitive business tax rates and a robust and transparent tax regime gives Ireland a real advantage in the market for attracting direct investment,” according to Feargal O’Rourke, head of tax at PwC Ireland.

“The survey confirms that Ireland’s tax system is the most effective and straightforward in the EU. While no-one likes paying tax, the Irish tax system makes it relatively easy to comply with the rules and is much less bureaucratic compared to other EU countries,” he added.

“One of the reasons why Ireland leads in the EU as the most effective country to deal with taxes is due to the Revenue continuing to make substantial advances in the area of electronic filing and payments and taking a proactive approach to making it easier for companies and individuals to deal with their obligations,” according to Mr O’Rourke.

Despite recent negative press about Ireland’s tax system, PwC said the transparency of the country’s taxation regime — together with its low corporate tax rate and the relative administrative ease in paying — remains “vital” in continuing to underpin Ireland’s position as a location of choice for foreign direct investment.

“This transparency and relative ease to pay taxes, together with 72 treaties and world class R&D tax credit system, are important elements in providing us with an opportunity to help multinational corporations establish operations in Ireland, as well as expand their operations here,” said Mr O’Rourke.

He added: “Ireland’s ability to cope with multiple tax payments and, at the same time to have a system that eases the administrative burden is a credit to our regulatory and tax authorities.

In terms of ease of tax paying for businesses, Ireland only ranks behind Qatar, the UAE, Saudi Arabia, Hong Kong and Singapore on a global basis.


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